Government bonds more attractive after improved credit rating

 

The State Treasury on July 29 issued VND8 trillion worth of government bonds through auction. The amount of bonds offered to buy reached VND20 trillion.

The auction had the highest-ever ordered value, and one of several with the biggest volume of bonds put on sale.

All the VND8 trillion worth of bonds have been sold, which included VND1 trillion worth of 2-year bonds, VND2 trillion worth of 3-year bonds, VND3 trillion worth of 5-year bonds and VND2 trillion worth of 10-year bonds.

Analysts noted that though the interest rate of 5-year and shorter-term bonds has decreased sharply, government bonds remain very attractive in the eyes of investors, especially commercial banks.

A report of the Hanoi Stock Exchange (HNX), where the July 29 government bond auction was organized, showed that the two-year bonds were sold at the interest rate of 5.25 percent per annum, lower by 0.12 percent than the interest rate of the previous bidding session held on July 11.

Meanwhile, VND2 trillion worth of 3-year bonds were sold at the 5.68 percent per annum, or 0.11 percent lower than the bonds issued on July 17. As for 5-year and 10-year bonds, they were sold at 6.68 percent per annum and 8.48 percent, respectively.

Analysts believe that a new record in the volume of government bonds issued will be made this year. The State Treasury has successfully mobilized VND139.6 trillion worth of capital through bond issuance so far this year, higher than the total bond value issued in the entire year of 2013.

They also said that Moody’s latest decision on raising the government bond ratings by one notch, from B2 to B1 with a stable outlook, and raising the long-term foreign currency bond ceiling from B1 to Ba2 and its long-term foreign currency deposit ceiling from B3 to B2 will help make Vietnamese government bonds more attractive.

The optimistic view about Vietnam’s economy will give finance institutions one more reason to buy Vietnamese government bonds and seek opportunities in the bond market once the other investment channels cannot bring attractive profits.

Moody’s also upped the country’s local currency country risk ceiling to Ba1 from Ba2.

Moreover, the stable dong/dollar exchange rate and the low inflation rate would also prompt investors to put high hopes on Vietnamese government bonds.

The State Treasury has announced that it would issue VND50 trillion worth of bonds in the third quarter of 2014, which is VND47 trillion higher than the value of bonds issued in the second quarter, but lower than the VND75 trillion of the first quarter.

The majority of the bonds to be issued in the third quarter would be 3-year and 5-year bonds. The analysts from the Bao Viet Securities JSC noted that the State Treasury has been trying to issue more long-term bonds and gradually reduce the amount of short-term bonds.

The amount of 2-year bonds issued so far this year have decreased from VND17.645 trillion to VND9.544 trillion in the second quarter and is expected to fall to VND6 trillion in the third quarter.